What type of cold storage occupiers need today may result in changes for builders of the facilities, the occupiers, corporate bottom lines, and ultimately consumers when they seek the once stored cold/frozen items on their grocery store shelves.
Why is this happening now? According to an interview between Colliers Capital Markets and Rick Kingery, senior vice president and leader of Colliers’ Food & Beverage practice group, it’s because of a typical reason: supply and demand. In this case, industrial vacancies are low and rents at such facilities are at record highs.
The second key question is what can occupiers do? In many cases when they realize that cold/frozen space in the size and configuration they want is unavailable in the exact location they favor, they can look for other choices, which may also influence builders of these facilities. Altogether, five key changes may take place in this niche that industry participants should be aware of:
1. Alternative Locations
What occupiers find that’s affordable and acceptable may be located in a secondary market rather than what they have traditionally selected. “This is happening faster,” Kingery says.
2. Temperature Variations
It also is pushing investment in new and the next generation of facilities since so much existing inventory is older and not as appealing. To meet demand in the most flexible way, some of the new product may be built on speculation and then customized to client needs. And one key to flexibility in this category is to offer different temperature zones within buildings, what’s called a “cold box within a box” since no two occupiers have the same cold-to-frozen mixture. With this kind of built-in flexibility, occupiers can crank the temperature down or up as demand requires for what they’re storing, Kingery says.
3 Less Spoilage, Faster Turnover
What else helps attract occupiers is knowing they can turn over products rapidly to avoid spoilage. Automation investments that are coming on fast and strong help achieve this, Kingery says.
4. Knowing Where To Build
Because of population growth in the Southeast and Southwest, food service distribution networks have focused on locations there. But the savviest keep an eye on emerging markets, too, such as Missouri where new production facilities range from meat packing to indoor vertical farming. And California has taken a share, too.
5. Reducing Labor And Number Of SKUs
Offering fewer SKUs in a market means fewer frequent changeovers at a factory, which can help increase company profits. It also can free up warehouse space for faster-moving products and reduce the number of pallet positions in the distribution network, Kingery says. All of this may ultimately affect consumers’ choices since they may find fewer items on shelves and in cold and frozen cases at their supermarket in coming months, he says. But that may not be all bad, he adds, “Maybe, we didn’t need so many varieties of ‘cherry’ to begin with!”